SteveTheHawk

Forget the Moral Outrage: Just Restore the Mortgage Markets

That the GSE shareholders may walk away with nothing is not "punitive". To say that it is implies that shareholders are blamed for the disaster. It is simply a situation in which they invested in a company (GSE or not) that is now theoretically worth less than zero. Management ran the companies into the ground with ridiculous fiscal policies and destroyed the balance sheets.

Just as would happen with an investment in any other company in this situation, the shareholders would watch their investment go to zero. Should we as a government move to shore up the GSE's until things turn around? Absolutely.... we have to. Should the shareholders be protected? No. They own shares in an insolvent company.

To bailout the GSE's is pathetic in the sense that they were allowed to dig themselves into this hole to begin with. Given the perpetuity of human greed, I believe that BEFORE any bailouts take place, the rules of the game need to be rewritten. Significant oversight and firm restrictions must be in place to insure that this does not happen again. If that means that fewer people buy homes, then so be it.

So, if we must restore the mortgage market, then we must. But we also must realize that the rules of the game have to change significantly.